Certifiably Mad?
Evolving Standards for Class Certification in Securities Fraud Actions

Class certification increasingly has become a hotly contested issue in actions arising under § 10(b) of the Securities Exchange Act of 1934. More than ever before, defendants are mounting vigorous challenges, and in particular, challenges implicating the fraud-on-the-market doctrine that is so essential to securities fraud plaintiffs. This new trend changes the traditional landscape of securities fraud actions by providing another—or at least an earlier—battlefront on which defendants can create pressure points in the litigation.

In the last several years, a number of courts have addressed and clarified the required levels of inquiry at the class certification stage. In many of these actions, courts have addressed application of the fraud-on-the-market presumption, and whether defendants should be allowed to put on a rebuttal at the class certification stage. Not surprisingly, the resulting landscape of evidentiary standards and burdens is varied. Highlighted below are some of the more notable, and recent, opinions across jurisdictions.

 

I. BACKGROUND: RULE 23 AND THE § 10(b) CLAIM

Class-certification determinations rest on the sound discretion of the district court, exercised within the framework of Federal Rule of Civil Procedure 23.1 As a general matter, a district court may certify a class where (i) the proposed representative satisfies the requirements of numerosity, commonality, typicality, and adequacy under Rule 23(a), and (ii) the proposed action meets the requirements of one of the subsections of Rule 23(b). Class actions premised on subsection (3) of the latter provision requires that “questions of law or fact common to the members of the class predominate over questions affecting only individual members....”
Notwithstanding Eisen v. Carlisle & Jacquelin,[2] in which the Supreme Court held that Rule 23 did not authorize courts “to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action,” most Circuits agree that district courts are allowed, if not obliged, to assess merits issues to the extent that they overlap with Rule 23 requirements.[3] Because reliance, and loss causation, are essential elements of a § 10(b) claim, a proposed class representative in a § 10(b) action invoking Rule 23(b)(3) must establish that individual questions will not predominate over common questions with respect to whether each proposed class member relied to his detriment on an alleged misrepresentation. To do this, plaintiffs typically invoke the fraud-on-the-market doctrine adopted by the Supreme Court in Basic Inc. v. Levinson, which creates a rebuttable presumption of reliance when the alleged material misstatements become public and the security is traded on an efficient market.[4] A defendant can rebut this presumption by “sever[ing] the link between the alleged misrepresentation and...the price received (or paid) by the plaintiff.”[5] Without the presumption, questions of individual reliance would predominate, and the proposed class would fail. 

 

II. SEVERAL CIRCUITS INVOKE A PREPONDERANCE OF THE EVIDENCE STANDARD AT THE CLASS CERTIFICATION STAGE

A. Fifth Circuit

One of the most prominent recent opinions addressing class certification in a securities fraud action is Oscar Private Equity Invs. v. Allegiance Telecom, Inc.[6] In Oscar, the Fifth Circuit held, over a dissent, that securities fraud plaintiffs relying on the fraud-on-the-market doctrine to satisfy Rule 23(b)(3) must first prove loss causation by showing that correction of an alleged misrepresentation, and not other public reports or disclosures, impacted the price of the security at issue.  Thus, the Court in effect shifted the burden to plaintiffs with respect to loss causation rather than requiring defendants to rebut the fraud-on-the-market presumption.

Previously, the district court in Oscar had ruled, relying on Basic, that the fraud on-the-market presumption applied to the securities at issue, thereby establishing a rebuttable, class-wide presumption of reliance on defendants’ alleged representations. The court further had reasoned that “the class certification stage is not the proper time for defendants to rebut lead Plaintiffs’ fraud-on-the-market presumption.”[8]

On appeal, however, the Fifth Circuit, which historically has exercised latitude under Basic to constrain the impact of the fraud-on-the-market doctrine,[9] vacated the decision.[10] The Court explained that, because market efficiency and the fraud-on-the-market presumption are central to a Rule 23(b)(3) inquiry in a securities fraud action, a district court must “address and weigh factors both for and against market efficiency” at the class certification stage.[11] After applying a “preponderance of all admissible evidence” standard,[12] the Court held that plaintiffs must prove “that it is more probable than not that it was …[the alleged] negative statement, and not other unrelated negative statements, that caused a significant amount of the decline.”[13] Notably, such proof, the Court explained, “demands a peek at the plaintiff’s damages model—an empirically-based inquiry, not speculation about materiality alone.”[14]

As discussed below, other Circuits have adopted the preponderance of the evidence standard with respect to class certification. Nevertheless, to date, Oscar stands alone in shifting the burden to plaintiffs to demonstrate a price impact on the security when relying on the fraud-on-the-market doctrine to satisfy Rule 23(b)(3).

B. Second Circuit

In consecutive opinions last fall, the Second Circuit clarified that district courts, prior to certifying a class, must find that each element of Rule 23 is established by a preponderance of the evidence. See In re Salomon Analyst Metromedia Litig., (“Salmon”);[15] Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc. (“Teamsters”)[16] Specifically in Salomon, a case involving an analyst rather than issuer statements, the Court ruled that all “evidence must be assessed as with any other threshold issue” and “[s]uch an assessment can be made only if the judge resolves the factual disputes relevant to each Rule 23 requirement and is persuaded” that the requirements have been met.[17] The Court disavowed the ambiguous “some showing” standard at the class certification stage, which had been invoked by the lower court, as well as any suggestion that a district court may not weigh conflicting evidence in a Rule 23 assessment if it overlaps with an issue on the merits.[18] Seeking to “dispel any remaining confusion”, the Court reiterated in Teamsters that district courts must find that each element of Rule 23 is established by a “preponderance of the evidence.”[19]

Unlike the Fifth Circuit, the Second Circuit in Salomon ruled, with respect to application of the fraud-on-the-market doctrine, that “[p]laintiffs do not bear the burden of showing an impact on the price” at the class certification stage.[20] Rather, the “point of Basic is that an effect on the market is presumed.”[21] Thus, in reversing the district court, the Second Circuit ruled that “the burden of showing that there was no price impact is properly placed on defendants at the rebuttal stage.”[22] At the same time, because a district court’s obligation to make factual determinations “is not lessened by overlap between a Rule 23 requirement and a merits issue,” the Court made clear that securities fraud defendants must be afforded an opportunity to rebut the fraud-on-the-market doctrine prior to certification of any class.[23]

C. Third Circuit

In an opinion after Oscar but before Salomon/Teamsters, the Third Circuit confirmed in In re Hydrogen Peroxide Antitrust Litig. that “[f]actual determinations supporting Rule 23 findings must be made by a preponderance of the evidence.”[24] Likewise, the Court confirmed that factual or legal issues relevant to class certification must be resolved “even if they overlap with the merits.”[25] It also clarified that a district court’s obligation to consider all relevant evidence extended to expert testimony.[26]  However, given that Hydrogen Peroxide did not involve claims of securities fraud, the Court did not assess the fraud-on-the-market doctrine.

Several years earlier in Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., the Third Circuit ruled in the securities fraud context that a district court must conduct “a thorough examination of the factual and legal allegations,” which may require “prob[ing] behind the pleadings.”[27] Newton did not involve an alleged misrepresentation or omission that impacted the value of a stock, but instead broker-dealers’ alleged breaches of their duties of best execution. Distinguishing this case from a fraud-on-the-market or excessive over-pricing policy claim, the Court ruled that “a putative class may presumptively establish economic loss on a common basis only if the evidence adequately demonstrates some loss to each individual plaintiff.”[28] Accordingly, the Court affirmed the lower court’s denial of class certification, ruling that plaintiffs failed to establish a presumption of economic loss because they were unable to demonstrate that each class member had in fact been economically injured.[29]

D. District Courts

Notably, at least two district courts in the Fourth Circuit have invoked the preponderance of the evidence standard at the class certification stage. See In re The Mills Corp. Sec. Litig.;[30] In re Safety-Kleen Corp. Bondholders Litig.[31] In both Mills and Safety-Kleen, the courts explained that the Fourth Circuit requires “findings” after “rigorous analysis” but has not adopted a precise evidentiary standard.[32] After acknowledging a split with respect to any assessment of loss causation in the context of Rule 23, the Mills court concluded that requiring plaintiffs “to ‘prove’ loss causation at class certification risks converting this stage into a hearing on the merits.”[33] “[R]equiring a factual showing of loss causation at the class certification stage would be—to borrow a cliché—putting the cart before the horse.”[34]

Likewise, a district court in the Eleventh Circuit, a Circuit which has not adopted a precise evidentiary standard for class certification,[35] recently invoked the preponderance of the evidence standard in a securities action.[36] Citing Salomon and Hydrogen Peroxide, this court noted that such standard “seems to be gaining momentum.”[37] Nevertheless, after concluding that the market for the securities at issue was efficient based on the Cammer factors,[38] the court rejected Oscar’s requirement that plaintiffs prove loss causation at the class certification stage.[39]

 

III. MOST CIRCUITS HAVE NOT DEFINED A PRECISE EVIDENTIARY STANDARD BUT NONETHELESS REQUIRE RIGOROUS INQUIRY

In addition to the Fourth and Eleventh Circuits,40 the jurisdictions discussed below have not adopted a precise evidentiary standard for Rule 23 determinations but rather have required varying degrees of rigorous inquiry. Likewise, to the extent they have addressed the fraud-on-the-market doctrine, these courts have declined to adopt Oscar’s burden-shifting and, in some instances, have shown a reluctance to assess rebuttal arguments at all prior to class certification. 

A. First Circuit

Going back several years, in In re PolyMedica Corp. Sec. Litig., the First Circuit confirmed, in light of prior precedent, that district courts were entitled to “look beyond the pleadings in…[their] evaluation of the applicability of the fraud-on-the-market presumption of reliance, and…[their] resolution of the class-certification question.”[41] Defendants in that case had argued that the fraud-on-the-market presumption was inapplicable because the market for its stock was not “efficient.” The district court agreed with plaintiffs, whose expert proffered “widely-accepted market-efficiency factors” under Cammer.[42] In affirming the decision, the First Circuit noted that the question of how much evidence of efficiency is necessary to apply the fraud-on-the-market presumption is one of “degree.”[43] Further, courts “must draw these lines sensibly, mindful that...other more accessible and manageable evidence may be sufficient at the certification stage to establish the basic facts that permit a court to apply the fraud-on-the-market presumption.”[44]

More recently, the First Circuit in In re New Motor Vehicles Canadian Exp. Antitrust Litig., described the level of inquiry required at the class certification stage by the Second and Fifth Circuits, along with the Fourth and Seventh Circuits, as “around the more rigorous end of this spectrum.”[45] In discussing the fraud-on-the-market presumption addressed in PolyMedica, the Court reiterated that a district court should “probe the factual basis of the...presumption to make sure it will be a viable form of proof in a given case.”[46] The Court concluded more generally, “reliance on a novel theory to establish a primary element of a claim necessitates a more searching inquiry into whether plaintiffs will be able to prove the pivotal elements of their theory at trial.”[47]

Likewise, several weeks ago, a district court in Massachusetts applied that guidance in ruling that a plaintiff “need only present basic facts that the fraud-on-the-market presumption could be invoked, while the theory’s actual applicability should be resolved on summary judgment or at trial.”[48] Such “basic facts should be sufficient for the court to determine whether the fraud-on-the-market theory was reasonably applicable, specifically whether...the market was efficient.”[49]

B. Seventh Circuit

The Seventh Circuit has not issued any recent opinion involving review of a class certification decision, let alone in a securities action. Nevertheless, as set forth in Szabo v. Bridgeport Mach., Inc., Seventh Circuit law requires that district courts make “whatever factual and legal inquiries are necessary.”[50] If some of the considerations overlap with the merits, “then the judge must make a preliminary inquiry into the merits.”[51]

However, several years ago in West v. Prudential Sec., Inc., the Seventh Circuit did consider whether the fraud-on-the-market doctrine could be extended to “non-public” statements.[52] The district court had certified a class of purchasers who purchased securities during the period of the alleged false statements. On appeal, the Seventh Circuit reversed, holding that a district court must identify a “causal link between non-public information and securities prices.”[53] The Court noted that “[t]ough questions must be faced and squarely decided, if necessary by holding evidentiary hearings and choosing between competing perspectives.”[54]

C. Eighth Circuit

The Eighth Circuit, in a recent antitrust action, recognized that a “preliminary inquiry at the class certification stage may require the court to resolve disputes going to the factual setting of the case, and such disputes may overlap the merits of the case.”[55] However, the Court cautioned that factual disputes “may be resolved only insofar as resolution is necessary to determine the nature of the evidence that would be sufficient, if the plaintiff's general allegations were true, to make out a prima facie case for the class.”[56] Previously, in Alpern v. UtiliCorp United, Inc., the Court instructed a district court to “consider the requirements of Rule 23(a) in light of the evidence in the record.”[57] The Court also noted that typicality is a “burden ‘fairly easily met’” and expressed disappointment that the district court summarily had denied certification without citing any evidence or legal authority.[58]

D. Ninth Circuit

The Ninth Circuit also has not recently issued an opinion involving review of a class certification decision. Nevertheless, in Hanon v. Dataproducts Corp., the Court held that “[a] class may only be certified if we are ‘satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied.’”[59]  While affirming the denial of class certification on the basis of a lack of typicality, the Court ruled that “reliance on the integrity of the market” with respect to loss causation would be subject to dispute given plaintiff’s “extensive experience in prior securities litigation” and other conduct that would lead one to conclude that he bought stock in order to bring the lawsuit.[60] The Court further noted that district courts are “at liberty to consider evidence which goes to the requirements of Rule 23 even though the evidence may also relate to the underlying merits of the case.”[61]

Notably, in the wake of Oscar and Salomon/Teamsters, district courts in the Ninth Circuit have indicated a disinclination to heighten the evidentiary standard. See In re Cooper Co. Inc. Sec. Litig.;[62] see also In re LDK Solar Sec. Litig.[63] In Cooper, the court rejected defendants’ attempt to rebut the fraud-on-the-market presumption, concluding that it was “not obligated to discern the meaning and impact of specific, possibly corrective, statements at this stage of the case.”[64] Likewise, in LDK Solar, the court expressly rejected Oscar’s requirement at the class certification stage of proof of a material misstatement that moved the market, i.e., loss causation. The court concluded that Ninth Circuit precedent rejects such a requirement because “a price impact is not required for a finding of materiality.”[65] Moreover, the court concluded that Oscar’s burden-shifting was inconsistent with Basic.[66]

E. Tenth Circuit

Finally, the Tenth Circuit has not defined a precise evidentiary standard for class certification.[67] Outside the securities arena, the Court has ruled that “[a] party seeking class certification must show ‘under a strict burden of proof’ that all four requirements [of Rule 23(a)] are clearly met.”[68] However, a “district court should avoid focusing on the merits”[69] and commits error if “the denial of class certification was influenced by the court's preliminary evaluation of the merits of [plaintiff's] claim.”[70] Likewise, in a recent decision from a district court in the Circuit, the court expressly rejected the reasoning of Oscar, noting “Oscar appears to be in conflict with Supreme Court and Tenth Circuit precedent that warn against determining the merits at the class certification stage.”[71]

 

IV. CONCLUSION

As seen above, there has been little inclination in other jurisdictions to follow the lead of the Fifth Circuit in shifting the burden of the fraud-on-the-market doctrine to securities fraud plaintiffs to prove a price impact at the class certification stage. Nevertheless, it is clear that courts are amenable to conducting increasingly rigorous inquiries at the class certification stage to satisfy themselves that each requirement of Rule 23 has been met. Likewise, whether in the Fifth, Second or Third Circuits where courts are required to apply a preponderance of the evidence standard, or in other jurisdictions without precise evidentiary standards, defendants should carefully consider the strength of their class certification arguments and the ways in which such arguments may impact the cost-benefit analyses that parties face at different stages of a securities fraud action.

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[1] See Gulf Oil Co. v. Bernard, 452 U.S. 89, 100 (1981).

[2] 417 U.S. 156, 177 (1974).

[3] See, e.g., Salomon Analyst Metromedia Litig., 544 F.3d 474, 484 (2d Cir.2008) (quoting In re Initial Public

Offering Sec. Litig., 471 F.3d 24, 42 (2d Cir. 2006)) (noting that district court has an obligation to make factual determinations that are “not lessened by overlap between a Rule 23 requirement and a merits issue.”); Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154 (3d Cir.2001) (it “would be contrary to the rigorous analysis of the prerequisites established by Rule 23 before certifying a class to put blinders on as to an issue simply because it implicates the merits of the case”); Gariety v. Grant Thornton, LLP, 368 F.3d. 356, 366 (4th Cir. 2004) (“the factors spelled out in Rule 23 must be addressed through findings, even if they overlap with issues on the merits”); Blades v. Monsanto Co., 400 F.3d 562, 575 (8th Cir. 2005) (court may be “required to resolve disputes concerning the factual setting of the case”); Valley Drug Co. v.Geneva Pharms., Inc., 350 F.3d 1181, 1188 n.15 (11th Cir. 2003) (noting that a court “should consider the merits of the case to the degree necessary to

determine whether the requirements of Rule 23 will be satisfied”); Wagner v. Taylor, 836 F.2d 578, 587 (D.C. Cir.

1987) (“It is readily apparent that a decision on class certification cannot be made in a vacuum… [S]ome

inspection of the circumstances of the case is essential to determine whether the prerequisites of Federal Civil Rule 23 have been made.”); cf.J.B. ex rel. Hart v. Valdez, 186 F.3d1280, 1290 n. 7 (10th Cir. 1999) (“when deciding a motion for class certification, the district court should accept the allegations contained in the complaint as true”).

[4] 485 U.S. 224, 244 (1988).  The doctrine provides that public information is reflected in the market price of a security and it can be assumed that an investor who buys or sells the security at the market price relies upon the statement. 

[5] Id. at 245.

[6] 487 F.3d 261 (5th Cir. 2007).

[7] Id. at 262.

[8] Id. at 266.

[9] See, e.g., Greenberg v. Crossroads Sys., Inc., 364 F.3d 657, 665 (5th Cir. 2004) (plaintiffs must show “that the cause of the decline in price is due to the revelation of the truth and not the release of unrelated negative information”); Unger v. Amedisys Inc., 401 F.3d 316, 325 (5th Cir. 2005) (district courts must “find” facts supporting class certification pursuant to “a complete analysis of fraud on the market indicators”).

[10] 487 F.3d at 262.

[11] Id. at 267-68.

[12] Id. at 269.

[13] Id. at 270 (internal quotations omitted).

[14] Id. Ultimately, plaintiffs failed to demonstrate loss causation because their evidence consisted chiefly of analyst commentary and “well-informed speculation,” as opposed to any “post-mortem” data that showed that the line count restatement individually moved the market. Id. at 271.

[15] 544 F.3d 474 (2d Cir. 2008).

[16] 546 F.3d 196 (2d Cir. 2008).

[17] 544 F.3d at 483. 

[18] Id. at 484 (quoting In re Initial Public Offering Sec. Litig., 471 F.3d 24, 42 (2d. Cir. 2006)).

[19] Teamsters, 546 F.3d at 202.

[20] Salomon, 544 at 483.

[21] Id. (emphasis in original).

[22] Id. (citation omitted).

[23] See Salomon, 544 F.3d at 485.

[24] 552 F.3d 305, 307 (3d Cir. 2008).

[25] Id.

[26] Id.

[27] 259 F.3d 154, 166 (3d Cir. 2001) (citation omitted). 

[28] Id. at 180.

[29] See id. at 181 (“[T]he putative class would be entitled to a rebuttable presumption of reliance but not of economic loss. Therefore, their claims do not warrant a rebuttable presumption of class-wide injury.”).

[30] No. 1:06-cv-077, 2009 WL 1032792, at *3 (E.D. Va. Apr. 16, 2009) (“The Court...will apply the preponderance standard in this Rule 23 inquiry.”).

[31] No. 3:00-1145-17, 2004 WL 3115870, at *2 (D.S.C. Nov. 1, 2004) (“Although there is a scarcity of cases on point, the existing authority suggests that the preponderance of the evidence standard should be applied.”). 

[32] Id. (citing Gariety, 368 F.3d 356 (4th Cir. 2004)). In Gariety, the Fourth Circuit ruled that failing to look beyond the pleadings frustrates a district court’s obligation to “tak[e] a ‘close look’ at relevant matters”, “conduct a ‘rigorous analysis’ of such matters”, and “mak[e] ‘findings’ that the requirements of Rule 23 have been satisfied”. 368 F.3d at 365 (citation omitted). 

[33]  2004 WL 3115870, at *7 (citation omitted).

[34] Id.

[35] Eleventh Circuit law requires a district court to conduct a “rigorous analysis” while stopping short of “determin[ing] the merits of the plaintiffs' claim at the class certification stage”. Vega v. T-Mobile USA, Inc., No. 07-13864, 2009 WL 910411, at *4 (11th Cir. Apr. 7, 2009) (citing Valley Drug Co. v. Geneva Pharms., Inc., 350 F.3d 1181, 1188 n.15 (11th Cir. 2003)).  The court “should consider the merits of the case to the degree necessary to determine whether the requirements of Rule 23 will be satisfied.”  Valley Drug Co., 350 F.3d at 1188 n.15.  Notably, in Katz v. MRT Holdings, LLC, a district court recently cited an old Eleventh Circuit decision for the proposition that to establish application of the fraud-on-the-market theory, plaintiffs need to “establish that the security at issue would have been unmarketable but for the alleged fraud.” No. 07-61438-CIV, 2008 WL 4725284, at *5 (S.D. Fla. Oct. 24, 2008) (citing Ross v. Bank South, N.A., 885 F.2d 723, 729 (11th Cir. 1989).  This burden “is a substantial one.”  Ross, 885 F.2d at 729.

[36 ]See In re HealthSouth Corp. Sec. Litig., No. CV-03-BE-1500-S, 2009 WL 1040107, at *9 (N.D. Ala. Mar. 31, 2009) (citing In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 316 (3d Cir. 2008) and Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196, 202 (2d Cir. 2008)).  “The Eleventh Circuit, however, has not clearly articulated the standard of proof required at the class certification stage when courts must perform a ‘rigorous analysis’ of the Rule 23 prerequisites without determining the merits of the case.”  HealthSouth, 2009 WL 1040107, at *8.

[37] HealthSouth, 2009 WL 1040107, at *9.

[38] See Cammer v. Bloom, 711 F. Supp. 1264 (D.N.J. 1989).

[39] HealthSouth, 2009 WL 1030107, *19.  Nevertheless, the Court proceeded to note that “[n]ot even [Defendant] UBS argues that Plaintiffs could not establish a unified loss causation theory”, which under Eleventh Circuit law “requires only that a cause—defendants' fraud—be proximately linked to an effect—plaintiffs' economic losses.”  Id. (citing Robbins v. Kroger Props., Inc., 116 F.3d 1441, 1447 (11th Cir. 1997)).

[40] See supra notes 32-35 and accompanying text.

[41] 432 F.3d 1, 6 (1st Cir. 2005).

[42] Id. at 4.

[43] Id. at 17.

[44] Id.

[45] 522 F.3d 6, 24-25 (1st Cir. 2008).

[46] Id.

[47 ]Id. at 26, 29 (“We are looking here not for hard factual proof, but for a more thorough explanation of how the pivotal evidence behind plaintiff's theory can be established.”).

[48] In re Boston Scientific Corp. Sec. Litig., No. 05-cv-11934, 2009WL 723490, at **34-35 (D. Mass. Mar. 10, 2009) (internal quotations omitted) (citing New Motor Vehicles, 522 F.3d at 25).

[49] Id.

[50] 249 F.3d 672, 676 (7th Cir. 2001).

[51] Id. at 676.

[52] 282 F.3d 935 (7th Cir. 2002).  In the case, a corrupt stockbroker spread false “material” inside information about a company to eleven of his clients.

[53] Id. at 938.

[54] Id.

[55] Blades, 400 F.3d at 575 (citing Szabo, 249 F.3d at 676-77).

[56] Id. 

[57] 84 F.3d 1525, 1540 (8th Cir. 1996). 

[58] Id. at 1540.

[59] 976 F.2d 497, 509 (9th Cir. 1992) (quoting Gen. Tel. Co. Southwest v. Falcon, 457 U.S. 147, 161 (1982)).

[60] Hanon, 976 F.2d at 508.

[61] Id. at 509 (citing In re Unioil Sec. Litig., 107 F.R.D. 615, 618 (C.D. Cal. 1985)); see also Parra v. Bashas', Inc., 536 F.3d 975, 979 (9th Cir. 2008) (finding that district court in a Title VII action abused its discretion in failing to find commonality after plaintiffs presented “extensive evidence” of discriminatory pay practices).

[62] 254 F.R.D. 628 (C.D. Cal. 2009).

[63] 255 F.R.D. 519 (N.D. Cal. 2009).

[64] 254 F.R.D. at 641-42.

[65] 255 F.R.D. at 531 (emphasis in original)(citing No. 84 Employer-Teamster Joint Council Pension Trust Fund v. America West Holding Corp., 320 F.3d 920, 934 (9th Cir. 2003) (reversing motion to dismiss, and finding that bright-line stock-price impact rule would contravene Supreme Court’s “reasonable investor” standard in Basic)).  Separately, the court also found that a partial disclosure does not defeat plaintiffs’ reliance on the market, and complications with respect to damage computations should be left to a later time. LDK Solar, 255 F.R.D. at 528-30.

[66] Id. at 531.

[67] Neither the Sixth Circuit nor D.C. Circuit has adopted a precise evidentiary standard either.  In the Sixth Circuit, “a district court may not certify any class without ‘rigorous analysis’ of the requirements of Rule 23”.  Sprague v. Gen. Motors Corp., 133 F.3d 388, 397 (6th Cir. 1998) (citation omitted); see also Coleman v. Gen. Motors Acceptance Corp., 296 F.3d 443, 446 (6th Cir. 2002).  Notably, in a recent opinion, a magistrate judge reopened discovery after defendants, relying on Oscar, argued that plaintiffs had failed to establish loss-causation.  Reasoning that Oscar “stretches” Rule 23 in a way “somewhat unique to the Firth Circuit,” the court concluded that plaintiffs were not placed on “notice” that loss causation would be a class certification issue, and denied defendants’ motion to quash plaintiffs’ subpoena of defendants’ expert. Ross v. Abercrombie & Fitch Co, No. 2:05-cv-0819, 2008 WL 4059873, at *3 (S.D. Oh. Aug. 26, 2008); see also In re Delphi Corp. Sec., Derivative & "ERISA" Litig., 248 F.R.D. 483 (E.D. Mich. 2008) (noting that Rule 23(b)(3) predominance inquiry is “directed toward the issue of liability” and “is ‘readily met’ in securities fraud cases”).  
     The D.C. Circuit, in Hartman v. Duffey, a Title VII class action, recognized that in light of an “across-the-board class based solely upon a complaint alleging group discrimination...class certification under Rule 23—even in Title VII group discrimination cases—could only be granted after a rigorous analysis of whether adjudication of the named plaintiffs' claims and those of the class would indeed share common issues of fact or law.”  19 F.3d 1459, 1469 (D.C. Cir. 1994) (citing East Texas Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 405 (1977) and Gen. Tel. Co. v. Falcon, 457 U.S. 147 (1982)).  Notably, in assessing the appropriate duration of a class period, a district court recently considered the fraud-on-the-market theory. See In re Fannie Mae Sec. Litig., 247 F.R.D. 32 (D. D.C. 2008).  To avoid any determination of the merits, the court limited its inquiry to whether there was “a substantial question of fact as to whether the [press] release cured the market or was itself misleading.” Id. at 39.  The court reasoned that, if there is “no substantial doubt as to the curative effect of the announcement...[courts should] simply define the class period accordingly.” Id. (internal quotations omitted).

[68] Trevizo v. Adams, 455 F.3d 1155, 1162 (10th Cir. 2006)(citations omitted).

[69] Adamson v. Bowen, 855 F.2d 668, 676 (10th Cir.1988).

[70] Anderson v. City of Albuquerque, 690 F.2d 796, 799 (10th Cir. 1982).

[71] In re Nature's Sunshine Product's Inc. Sec. Litig., 251 F.R.D. 656, 665 (D. Utah 2008) (citing Eisen, 417 U.S. 156 (1974); Adamson, 855 F.2d 668 (10th Cir. 1988)).